TMI Blog2020 (11) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned and CIT in passing an order u/s 263 of the act on 30th of March 2020 is not proper. Revisionary proceedings is assessment of the short-term capital gain earned by the assessee on sale of shares - This issue has already been considered by the settlement commission which has been offered by the assessee as an additional income on which tax at appropriate rate is payable. Therefore even otherwise there is no prejudice caused to the revenue because assessee has already offered the above income as additional income before the settlement commission. Only grievance of the revenue to say that the order is erroneous and prejudicial to the interest of the revenue for the reason that assessee has been saved from penalty and prosecution on the issue. We have carefully considered the argument of the learned CIT DR on this aspect and find that when a specific authority is given to the settlement commission u/s 245H of the act to grant immunity from prosecution and penalty. Therefore, when a settlement commission is given a special power to grant immunity from prosecution and penalty Under the income tax act itself, it cannot be said that assumption of jurisdiction by the sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been issued for different issue and the findings and directions are given on different 4. That Ld. POT exceeded his jurisdiction in invoking Sec.263 for fresh examining the issue of STCG as the same stood properly examined and adjudicated on merit by Ld. A.O. during regular proceedings u/s. 143(3) of the I.T. Act. 5. That Ld. POT further erred in law in directing to pass denovo asstt. order, when the specific directions are for examining the issue of short term capital gain only. 6. That under the facts and circumstances, the order passed on 31.03.20 u/s.263 is unsustainable in law since, on 31.03.20 it was complete lockdown with all Govt, offices closed fully due to COVID-19 and the limitation stood extended from 31.03.20 to 30.06.20. 5. Facts of the case culled out from the assessment order passed in case of Mr. Mukesh Garg shows that Assessee is earning business income from a partnership firm engaged in manufacturing and export of pan masala containing tobacco, filed his return of income on 30 September 2015 at the total income of ₹ 34,432,330/-. The case of the assessee was selected for scrutiny under CASS for limited scrutiny to examine :- i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT referred to CBDT circular number 4/2007 and 6/2016 wherein the tests are laid down between the shares held as stock in trade and shares held as investment. Thereafter it was noted that:- the purchase and sale of shares with the motive of earning a profit, would result in the transactions being in the nature of trade/adventure in the nature of trade, but where the objective of the investment in shares of a company is to derive income by way of a dividend etc. then the profits accruing by changing such investment (by sale of shares) will yield capital gain and not revenue receipt on the cursory look, due to the sheer quantum and duration of share transactions it looks like these transaction should have been treated as business income chargeable to tax at the rate of 30% and not STCG which is chargeable rate of 15% tax. Therefore it was stated that the assessment order passed by the learned that AO why should not be set aside being erroneous and prejudicial to the interest of revenue. 7. Subsequently, another notice dated 27/9/2018 was issued by CIT stating that further, on perusal of the Ledger of Kisna Traders private limited filed by the assessee and claim th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss income rather than capital gains. This issue was also not examined. With respect to the agricultural income, it was noted that agricultural income of ₹ 5.90 lakhs were shown when there is no agricultural land holding. On the third issue, it was noted that when the property in Chanakyapuri is self occupied it need to examine in which year it was purchased. The fourth issue that was stated that assessee has purchases right of Vimal brand for ₹ 1.73 crores which is a sham transaction as amount of ₹ 1.30 crore is shown as creditor for purchase of such rights. 8. The assessee submitted its reply with respect to share transactions that during the assessment the AO asked question number eight on 1/2/17 and in response to that assessee submitted contract notes in support of the same and complete details were submitted by letter dated 17/2/2017, 3/11/2017, 11/11/2017 and 11/11/2017 (another letter) wherein the Demat statement, Ledger account of Varun capital services Ltd, Ledger account of assessee from the brokers books of accounts. It was contended that after examining the above, claim of the assessee was accepted over and above the explanation for which issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the learned CIT set-aside the assessment for to the file of the AO for making de novo assessment after giving proper opportunity to the assessee limiting the sphere of examination as Under:- a. Short-term capital gain and its nature and quantum, whether it is bogus or not, whether. Of holding shares is only 1 2 days as per the Demat account or 4 5 months as claimed, whether it is to be taxed at the rate of 15% or 30%, whether 1 2% commission is to be added for taking bogus accommodation entry of STCG from the entities controlled by Mr Rajneesh Gupta including Varun capital services private limited and Kisna creditors private limited, whether transaction of of market purchases of such shares was settled in 48 are sword not b. the source of investment in these shares may also be examined c. Bank statement of relevant period may be examined to see timing of payment for purchase and sale of shares and whether they are in sync with the crediting and debiting of such shares in the Demat account d. any other relevant point related to this issue 12. Accordingly order u/s 263 of the act was passed on 30 March 2020 which is under challenge before us. 13. As assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any show cause notice on this issue the directions contained in order u/s 263 are without jurisdiction as same could not have been issued. For this proposition he relied on the decision of the honourable Delhi High Court in 295 CTR (Del) 181 as well as 22 DTR (Del) 158 and honourable Punjab and Haryana High Court in 140 ITR 490. d. Adverting to ground number 1, 3 and 4 he submitted that the order of the learned assessing officer is neither erroneous nor prejudicial to the interest of the revenue as the issue has been examined u/s 143 (3) of the act. He submitted that the original assessment order was passed u/s 143 (3) and the issue in the limited scrutiny case was completely examined. He referred to notice u/s 142 (1) 2 February 2017, reply of the assessee dated 17 February 2017 and 2 November 2017 where the complete details were submitted. It was further stated that there was no discrepancy found in the above dated by the learned and CIT also. Therefore it cannot be said to be a case of even inadequate enquiry. Further, he submitted that in case of a limited scrutiny cases selected, limited enquiry is to be made. If such a limited inquiries made by the learned assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was provided therefore such order is not sustainable in law. He relied on the decision of the honourable Delhi High Court in 305 ITR 83 (Del), 194 taxmann 57 (Del). h. With respect to the applicability of the order u/s 263 of the act with respect to inadequate enquiry, conceivably two opinions et cetera et cetera several judicial precedents were relied upon. 14. The learned and CIT DR vehemently opposed the arguments of the learned authorised representative and supported the orders of the learned CIT she referred to the scheme of the act and stated that when the show cause notice was issued u/s 263 of the act thereafter the assessee proceeded to the settlement commission. She stated that as soon as the proceedings commenced u/s 263 of the act the assessee approached the settlement commission therefore, the date of passing of the order u/s 263 is irrelevant but the date of initiation of proceedings u/s 263 of the act are relevant. With respect to the erroneous and prejudicial order of the learned assessing officer, she submitted that, the assessee is avoiding the penalty u/s 271 (1) ( C ) of the act and prosecution by obtaining the order of the learned settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A proceeding can be said to be pending after its commencement and till it is concluded. In the present case it is not the case where fresh assessment pursuance of an order u/s 254 or 263 of the 264 has been made setting aside or cancelling an assessment order already passed. It is also not a case of search assessment u/s 153A or 153C. The regular assessment has also commenced at the time the return of income and furnished by the assessee and assessment order has been passed. The date of conclusion of an assessment proceedings is either the date of completion of an assessment order the expiry of the time limit specified u/s 153 (1) whichever is earlier. The only issue in the present case is that the assessment order has already been passed u/s 143 (3) of the act on 29/11/2017 and notices could have been issued to the assessee u/s 147 of the income tax act as the impugned assessment year is assessment year 2015 16, the notice u/s 147 would have been issued to the assessee till the expiry of four years from the end of the relevant assessment year or if a specified conditions are fulfilled then feel the expiry of six years from the end of the relevant assessment year. The releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reason that assessee has been saved from penalty and prosecution on the issue. We have carefully considered the argument of the learned CIT DR on this aspect and find that when a specific authority is given to the settlement commission u/s 245H of the act to grant immunity from prosecution and penalty. Therefore, when a settlement commission is given a special power to grant immunity from prosecution and penalty Under the income tax act itself, it cannot be said that assumption of jurisdiction by the settlement commission in accordance with the law wherein there are chances for waiver of penalty as well as immunity from prosecution is an order which will constitute prejudicial to the interest of the revenue. More so, there is no error in such order, which is yet to be passed. The assessee may get and immunity from prosecution and penalty order or it may not get. Therefore such situation cannot be preempted to assume jurisdiction u/s 263 of the act. 18. In view of above findings, we quash the order passed by the learned CIT u/s 263 of the income tax act. Therefore, appeal of the assessee is allowed considering the above two aspects and keeping the other aspects open. 19. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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